New York-based prediction exchange Karshi is reportedly seeking regulatory permission to begin margin trading, according to people familiar with the discussions.
Prediction markets have been in talks for months with the U.S. Commodity Futures Trading Commission (CFTC) to seek permission to expand the ways traders can finance their positions, the Financial Times reported on Friday. As of the latest update, the CFTC has not indicated whether approval will be granted, and the status of the application remains largely unclear.
Kalshi establishes monitoring and auditing department to promote regulatory approvals
According to a news article published Mr. Kalsi established an independent oversight and audit agency that publishes quarterly public reports on suspicious transactions and internal investigations on the prediction market provider’s website.
In addition, we have established an Oversight Advisory Committee that includes Lisa Pinheiro of the Analysis Group and Daniel Taylor, Director of the Wharton Forensic Analysis Institute. Taylor is well-versed in research on insider trading detection and fraud analysis. The commission will provide analysis to outside counsel and publish statistics on transactions cited, investigations, and disciplinary actions taken.
Kalsi also partners with Solidus Labs, a company that specializes in market health monitoring. “We believe that by implementing Solidus’ Proxy Trade Monitoring and Compliance Hub, Kalsi is demonstrating its highest commitment to consumer investor protection and market integrity,” said Asaf Meir, Founder and CEO of Solidus Labs.
The exchange could use the new oversight framework as part of its efforts to stay ahead of offshore rival Polymarket in the U.S. market. Margin trading allows investors to open positions without providing the entire contract amount upfront.
Large trading desks manage hundreds of millions of dollars and prioritize markets with liquidity and funding flexibility, all features that prediction markets lack. Margin is fundamental to institutional derivatives trading, said Jake Preiselowitz, a partner at law firm McDermott Will & Schulte and a former CFTC staffer.
“Margin is a core part of what hedge funds do today. If you’re an institutional investor, it’s basically impossible to trade derivatives any other way,” he said.
But if the CFTC approves the request, Mr. Kalsi may initially restrict margin trading to institutional investors. Retail traders will likely be limited to fully funded positions in the early stages.
The company recently hired a risk manager who previously worked at broker-dealer Velocity Clearing, a role it said helped it “build a solid foundation in margin and risk.”
Kalsi leads prediction markets into a “regulatory revolution”
When prediction exchanges debuted in July 2018, they began as small venues with betting markets limited to entertainment awards and elections. Since then, they have grown into large platforms covering sports, geopolitics, and financial outcomes.
The 2024 US presidential election further increased the popularity of prediction markets, increasing the monthly trading volume of Calci and Polimarket. reached Millions of dollars. Still, major hedge funds avoid the sector due to collateral requirements.
Kalsi was also founded in 2018, but needed regulatory approval before starting trading activities. Just two years later, it became the first prediction market exchange in the United States, and in 2024, financial regulators allowed it to operate as a clearinghouse, but only for “fully collateralized” trades.
This structure requires customers to pre-deposit the full amount of their position and changes margin trading requirements. The shift in regulatory sentiment toward predictive platforms occurred under the leadership of President Trump-appointed CFTC Chairman Michael Selig.
But leveraged trading products blur the line between trading and gambling, said Bill Singer, a former regulatory attorney.
“What we’re seeing in 2026 is the CFTC and the SEC saying there’s no longer a big difference between trading and gambling. How can you justify stretching your margin to trade in meme stocks instead of prediction markets when you have ETFs that offer 3x leverage on all sorts of weird stuff?” he said during one interview In F.T.
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